UPDATE – 4/11/2011
So following the summit for a further bailout – the Euro Debt Crisis, Greek Debt, Systemic Dailure and Procrastination – the self pronounced “solution” and bail out package for Greece, as predicted, fell flat within 5 days.
The moment the Greek Prime Minister George Papandreou called for a referendum, the reality of the Euro Zone fragility became reality. The slow motion car crash that is the Euro Crisis has slightly speeded up and realisation is dawning on our esteemed European Leaders as to how inadequate the mechanisms are for the Euro.
You simply cannot have 17 countries, all having 17 different economic policies pulling in different directions. You cannot have 17 different governments, with 17 different heads of state and 17 different finance ministers making policy.
The Euro Leaders are only now looking into the abyss that is the future – a future that could include the ejection of a member, or members from the Euro Zone.
Fiscal and policitcal Union will be essential in the coming months and years if the Euro is to survive in any feasible capacity. Yet it is becoming more and more likely now that Greece should not have been invited to join in the first place, and may be the first country to leave.
But the crisis will not end there. If one leaves it simply puts pressure on the next domino in line – Ireland, Italy, Portugal and Spain.
Whatever the result of the Greek Confidence vote this evening, it is simply another step on the road to the restructuring of the Euro.
ORIGINAL ARTICLE –
The credit crunch and banking crisis grinds on it’s merry way as yesterday it was announced that Spain’s credit rating was downgraded by the Moody’s credit agency.
The agency said it was reducing its rating by one notch to Aa2 and warned that a further downgrade could be in the offing if there were indications that Spain’s fiscal targets will be missed and if the public debt ratio increases more rapidly than currently expected, or if the funding requirements for the so-called savings banks – the cajas – are greater than anticipated.
The problem appears to be the cost of re-capitalising the cajas, which they fear could be more than double the cost stated by Spain, at over £50 billion.
Leaders of the Euro Zone countries meet today to finalise details of a deal to provide security for the Euro before the summit on the 24th-25th March. Many economists are calling for a more coherent and substantial solution to the debt crisis of the Euro zone, but it appears that Germany are putting the block on any deal.
Many would like Germany to become the lender of last resort and help provide a substantial fund to bail out the troubled states. However, it is likely that autonomy for those nations in economic and fiscal policy could be the price for any deal. We shall see.
We are probably only half way through the banking crisis, and the Euro is not out of the woods. Most analysts are siding with those that are betting the Euro will still be here in 2 years time. But maybe the real question is in what form and at what cost?